Escaping to a property in southern Spain and the Canary Islands during the long winter months is a real joy for many people. Owning a property and having a second home here has many advantages. Now is the time of year when owners also need to think about their obligations. Some non residents who have owned property here for many years are still not aware of the need to make an annual tax declaration. This is separate from the obligation to pay the annual IBI (rates) to the Town Hall.
The non resident tax declaration is made in the tax area where the property is situated. The tax is a personal tax so if you are joint owners each of you needs to present the tax declaration separately. All non-residents who own a property in Spain have to pay this tax as follows:
1. Income from lettings/rentals at 24.75% on the net rent received. A number of expenses can be offset against your income from rentals. These include Community fees; Town Hall rates (IBI) Insurance, utilities and interest on mortgages.
2. Deemed income on any property you own which is for your own use. This applies to second homes, holiday homes and any property you own in Spain as a non resident. This is taxable at 24.75% and assessed at 1.1% of the rateable (catastral) value. This applies during the period while you own the home, it is not an annual fixed sum. For example if you purchase in July it is payable from July to December 31st.
It is not possible to set up a standing order for this as each year the taxpayer has the obligation to complete the forms and present them to the bank for payment before the 31st of December. The tax authorities are able to claim unpaid non resident tax for the previous 4 years of ownership if you fail to declare. There can also be penalties and fines for late payment so it is far better to appoint a fiscal representative to pay the tax each year.
Our specialist in non resident tax returns is Antonio Diaz who has been advising clients on their tax obligations for more than 15 years. You can contact him on [email protected] or telephone one of our offices for more information. We will need a copy of your NIE number (Fiscal number), a copy of the deeds and a copy of the last rates receipt (IBI). You will also receive an annual reminder helping you to avoid any fines for late payment.